Saturday, November 15, 2008

Putting credibility on the line

You have to admire the attempts, really. It takes a lot of guts in a time when a growing majority of people hold a contrarian viewpoint, to put not only your personal but your professional credibility on the line. I know, when I started this blog I was confronted with the age-old bear blogger dilemma, anonymity or permanently risk personal and professional reputation?

Because I make absolutely nothing from this blog, and at the time I started it I was finishing school, seeking work in the google-age and the generally accepted belief was real estate can only go up you're crazy for thinking differently, I chose anonymity (since I have done CBC radio using my real name while referencing this blog and I'm almost positive that Tony Joe knows who I am).

Last week, we had this advertisement in the disguise of an op-ed, newspeak for opinion based editorial. It was a good attempt, and while it may give Dallas Chapple better name recognition, her factless opinions serve, in the opinion of not only HHV, but the vast majority of the commenters on the TC piece, to undermine her professional credibility. I suspect, in the longterm, this will prove not to be good for business.

This week (H/T to anonymous commentor in previous post) we have this advertisement, which despite it's professional communications release look and feel, states advertisement right on it. Perhaps the TC learned something from its experience with the comments last week and decided Tony would have to pay for his advertorial this week.

Throughout my life, I've tried to maintain composure in trying times. These are trying times. BC home sales are plummeting. Canada-wide, the real estate market is slumping faster than anytime in the past 26 years (as far back as 1982, one of the biggest housing crashes in Canadian history). I understand how hard it is for the local real estate industry players to maintain composure.

They have been drinking from the kool aid fountain so long, they actually believe the MSM is giving them an unfair shake right now. They believe this so much, they are now paying to correct the "misperceptions" the TC is "creating."

I have no doubt that Tony Joe and Dallas Chapple are ranked high amongst their peers for their ability to sell high priced homes, or volume, or both. But one's ability to sell a product does not make one a product market expert. And we are seeing evidence in their statements:
"Victoria continues to be a destination of choice with a diversified and strong economy... Given that our population is growing by thousands of people each year at a time when we have the lowest vacancy rate..."
Tony, you are right. What you fail to tell people is that these are not new factors, and had little to do with upwards price pressure to begin with. Throughout the last two decades, Victoria has had consistent population growth of just under 1% per year. This hasn't changed. The last census showed no increased rate of growth over the previous census.

The vacancy rate is a misleading statistic as it does not account for all of the new rental properties created in this past building boom as there have been few new institutional rentals added, however, I can tell you there has been an epidemic of secondary suite construction and substantial speculative buying, which led to new rental products not counted by CMHC.

Tony, you tell us that median prices haven't changed, even when you average out the the yearly growth, which is a marked difference from how you've reported VREB statistics for as long as I've been watching them. You've moved the yardsticks to hide a 8-10% downward change in median prices. Even if I accept your numbers, which are misleading, you can't hide the 3-4% decline in prices caused by inflation. If you bought a property in 2007 and find yourself in a must sell position in 2008, you will lose almost 10% of the money you tied up in the property when you account for REALTORS' fees, taxes and inflation.

Tony, your 1998 year claim of a "strong and stable market" is bunk. 1998 was not a strong and stable market, in fact, according to CBC, that period was a "crashing market," a time when construction workers were being laid off and developers weren't developing.

Tony, you talk about a ballon, it sounds like you could use a communications professional to let you know that using any kind of bubblicious word in a rapidly deflating market, completely, pardon the pun, deflates every word you wastefully paid for in your advertisement disguised as "market outlook" or whatever your group is calling it these days.

I'd love to hear REALTORS out there start speaking out (Al, you have not gone un-noticed here). In fact, if we get a Paul B type here in Victoria who starts building business from a different tune, I bet you'll have great success with the fence sitters when they start hopping back into the game in the years ahead, because it is about credibility.

Every day, more and more people are questioning the credibility of the VREB and it's spokespeople. Someone, please, jump into the credibility gap, be patient and secure a future for yourself and your family, and for the good of those of us who just want to buy a home without losing ours.

Credibility: by way of the Cappy Cap

44 comments:

hhv said...

A must read for people with time.

Nick said...

Thanks for that link HHV, that's a very interesting read!

Anonymous said...

Excellent post hhv. This downturn will cause irreparable damage to the reputation of REALTORs. As it should.

hp

hhv said...

Thanks hp,

It has every other time. You'd think they'd learn as an organization. Panic makes people do and say strange things.

Mr.4AM said...

Anon 7:38AM,
Yes the problem is that within 5 to 10 years, most people will forget and we are doomed to repeat history yet again. What we need is major changes in the realty sector. Un-monopolizing MLS would be a great start. Extending realtor 5 week courses to include 5 weeks of ETHICS courses wouldn't be a bad idea either.

Thanks for that post HHV, I continue to visit your site several times a week and really appreciate all your efforts.

Regards,
Mr.4AM

hhv said...

Mr4am,

Cheers. MLS is a defacto monopoly because there is little business case for an entreprenuer to establish one. How much would you pay for an independent listing/reporting agency? REALTORS obviously won't sell it on your behalf, so how do you market it? If it's going to work, one year from now is the time to establish it when the general public have a hate on for the REALTORS and are looking for an alternative.

MR.4AM said...

I have some decent computer skills, all the funding I'd likely need, and contacts to get something like an MLS alternative off the ground, but unfortunately, very little time to focus on such a relatively large project, at least at the software programming level. Still, if I find myself unemployed in the somewhat near future, I may seriously consider such a project.

roger said...

VREB is reluctantly learning that the MSM was a big factor in creating a speculative bubble which lead to high incomes for many REALTORS®. Now that the party is over the MSM is trumpeting the crash because this also sells newspapers and increases TV ratings.

The VREB full page ad will do little to convince buyers to leave the sidelines. One only needs to do a Google news search to see that everyday yields more doom and gloom articles. The falling stock market, credit tightening, drop in consumer confidence and recession predictions will only make the downhill trip pick up speed as the months go by.

Fellow bears - the boom ended last spring. Sales volume and prices are headed one way over the next year - DOWN. If REALTORS® are wringing their hands now they are in for a major shock in the spring. Listings will skyrocket starting in March and the few buyers left will be lowballing with the assistance of agents desperate to make a commission.

Dumb Canuck said...

65 more laid off at Bear Mountain. Apparently work will halt on 'The Highlander': http://vibrantvictoria.ca/blog/2008/11/16
/65-construction-workers-laid-off-as-bear-mountain-projects-wind-down/

This can't be good for employment

Anonymous said...

What about A&B that is closing up shop and laying off 200? So much for Victoria being immune and having such great fundamentals.

Anonymous said...

Not sure if this has been posted previously.

British Columbia Real Estate Association November 14, 2008 news release.

http://www.bcrea.bc.ca/news_room/2008-10.pdf

S2

vg said...

And Len Barrie had to fire his first coach too, man times are really tough out there on the Bear, lol. I predicted Melrose wouldn't last 20 games.

I read Barrie was goin in the dressing room drawing up plays when the coach wasn't in there. Sounds kind of desperate to me,just like those Bear Mountain email flip flop.

vg said...

Thats sad about A&B though, it's been an icon in this town. I remember going in there weekly when I was a kid, it was THE place to buy your tunes,between them and Kelly's duking it out for your business,now I just click a mouse.

hhv said...

from the school of ya think?

Anonymous said...

Thanks for the excellent and informative post -- keep up the good work. If Tony Joe and his constituency think that advertorials (and "facts") like this help the RE industry's case, well, I guess I'm an exception. What I take away from the advertisement is an even stronger conviction that I should hold out on buying in Victoria until the market is corrected to something approaching 2001 or 2002 levels, because the period since then has been nothing but irrational exhuberance with no substantive rationale behind it. It also seems to me that as people watch and wait, more sellers will wake up to the new reality and lower their asking prices accordingly, particularly as "low-ball" offers become more common.

mln said...

Exactly, it's confirmation from the VREB that they see it as bad as I do.

Just Jack said...

I have been thinking along the same lines of an alternative to the ML system. However, I don't think it is necessary to re-invent the wheel.

My thought has been that it is the first time buyer that has no person to turn to for help in buying their home. Providing them with the tools to understand what constitutes value and where the market for the different types of properties are heading would be of assistance to them.

Perhaps, design a computer valuation programme, such as Landcor or Zillow, but a lot better. A programme that prospective buyers, sellers and agents could use for an unbiased opinion for the most probable value of a property.

hhv said...

"My thought has been that it is the first time buyer that has no person to turn to for help in buying their home. Providing them with the tools to understand what constitutes value and where the market for the different types of properties are heading would be of assistance to them.

Perhaps, design a computer valuation programme, such as Landcor or Zillow, but a lot better. A programme that prospective buyers, sellers and agents could use for an unbiased opinion for the most probable value of a property"

Could a book do this? Or are you thinking of an application that someone could use to evaluate a particular property?

For $300 or so, you can get an unbiased market evaluation that is arms-length from a REALTOR.

Could we simply replicate that evaluation electronically?

Just Jack said...

Absolutely electronically.

Given a property address and basic input information from the home owner or prospective purchaser a valuation programme:

Can derive a median value and test if the property in question is in with a deviation either lower or higher than the median.

Can look at the previous sales history and trend the value up or down to the current date.

Can look at comparable sales, listing and expired listings.

Can take a neighbourhood or street that has not had a sale in the last year and by the use of trends over the last decade generate comparables that have been adjusted for current economic conditions along the property's immediate street.

Plot the physical characteristics of the property in question and express the value along a curve such as finished floor area, lot size, age, condition in order to derive preference curves. Which would allow you to do "what if" scenarios.

Print out a graph of property values for a specific area for the last decade or so and extrapolate future possible values. Or determine the impact of a future commuter rail through a neighourhood.

You could plot rents and look at fundamentals, interest rates, and so on.

etc. etc. etc.

All for 50 bucks a pop.

patriotz said...

For $0, you can find the market rent for a similar property and multiply by 150. For condos, 100.

That's what it's worth. I don't care what the latest fool paid for a similar property, which is the estimated market price.

hhv said...

JJ,

Where do you collect the baseline info from? Sounds like inside MLS info to me.

Patriotz,

We both agree on the fundamental value, but you can demonstrated fundamental value and percieved market value to show deviation... ultimately it's the buyer who decides which they'll use to make their purchasing decision.

hhv said...

as an aside... i'm headed to Uvic market meltdown lecture tomorrow eve... i'm thinking of live blogging it through twitter... if people want me to, let me know in comments and sign up to follow through twitter using the link on the main page of HHV

Just Jack said...

This is not "the latest fool" paid value.

A model like this looks at hundreds of sales and would give the most probable value within a plus or minus percentage.

Yes, you can get some information from the ml system, also land titles and if you want all of the information you can buy it from BC Assessment. Zillow (US company) and Landcor (Vancouver company) get their information from these type of sources. They re-package the data, do a small amount of analysis and then sell it to agents, governments and the public. However, their weakness is in using a few comparable sales.

You can electronically estimate value using a Case-Shiller method or statisticallly or why not both.

Ultimately, you would like this system to be dynamic rather than estimating just a point in time value. In this way a person could check their property value every six months or so.

Anonymous said...

I'd like to be a bug on the wall for that UVIC lecture?

Is it open to the public?


jj

hhv said...

jj, it's a free lecture, open to the public in the centre auditorium... although they're now saying it's fully booked. i haven't heard back from my ticket request yet, so it looks like i may not be going after all... we'll see, i'll keep people posted here.

Just Jack said...

I just spoke with the Box Office too. They said I have to get there early and wait for a cancellation.

Talk about being the absolute nerd. I'm trying to scalp a ticket for an economics lecture!

Anonymous said...

If the ticket is free, is it technically scalping?

Just Jack said...

Scalping is illegal!

I would never do anything illegal. What I am professing to do is assist an undergraduated student in their studies by offering an economic inducement.

Let's just call it a bursary.

Anonymous said...

Actually scalping is legal in BC and most places in North America.

The old supply and demand rule works there too!

Anonymous said...

What if I'm naked when I do it?

hhv said...

jj,

I'm in the same boat as you it would appear... what kind of grease are you planning on offering? do you have a crackberry? would you be willing to live blog it via twitter?

roger said...

Just Jack,

This BC company offers a service that includes many of the features that you listed for under $30.00 per report.

Landcor Online Real Estate Analysis

Most buyers won't pay for the service. They mistakenly think they are getting the info for free when they use a real estate agent.

They also have free monthly updates to their Housing Price Index

Just Jack said...

Right on about Landcor.


The problem with Landcor and why they get very little return customers is their accuracy. Landcor still uses the same dated concept of three comparable sales.

And, you would have to be more open and fair with your customers. Not all properties can be estimated. Perhaps there is insufficient data to give a reasonable estimate - then you don't charge them.

If you have a valuation model with a high level of accuracy, then people will use it and they will tell others about it. Otherwise, it comes across as a money grab. Be fair to the people and they will be fair to you.


As for the cost being $30, $50 or $300 it makes no difference. You have to earn the client by providing higher accuracy and not boiler plate stats.

The concept of Landcor is a good one, it just needs a major over haul. Hey, get a beta programme working and you might find Landcor or Zillow buying you out.

Anonymous said...

I know the auditorium well... call the box office and say you need wheelchair/disabled access. They hold 8 handicapped seats. Walk with a limp or bring a cane/crutches. It's immoral and illegal and it will get you in.

patriotz said...

ultimately it's the buyer who decides which they'll use to make their purchasing decision.

That's self-evident, and I'm buying when I can get a property for what it's really worth. If someone else is willing to pay more than it's worth, I'm not going to compete with him.

"The one thing Warren Buffett does is that he controls the one and only thing any investor has control of in any investment transaction: the price he pays.

Buffett looks at a company, decides what its stock is worth, and refuses to pay more than a fair price."

Works for stocks and works for houses too.

Anonymous said...

Excellent strategy as long as no one else is bidding against you and the seller is under duress. For example when your buying a stake in Goldman Sachs.


Best of Luck

patriotz said...

Excellent strategy as long as no one else is bidding against you and the seller is under duress.

Like at the bottom of a RE bust?

Gotcha. See you in 2011 or so.

S2 said...

Interesting blog from the US.

http://underwaterhomeowner.blogspot.com/

hhv said...

s2, great find... its getting added... let's make this the great blog find of the decade. spread the word.

Art Vandelay said...

Mr4am, as I suggested to you in the comments to this blog entry
http://victoriastruth.blogspot.com/2008/11/quotable-quotes.html
you need to bone up on the word, "monopoly."

Same goes for you, apparently, HIV.

Justjack, let us know when you figure out how to accurately estimate value on a heterogeneous product such as housing. And then launch it as a website. Because, of course, the millions of dollars it takes annuallly for appraisers, assessors and realtors to attempt to arrive at market value - not to mention to maintain the MLS system - is all because we want to misprice our properties.

You better get to the economics lecture. You missed a lesson or two somewhere along the way.

boomer said...

OFF TOPIC---THIS gets my blood boiling.
As reported in the TORONTO STAR business section on NOV. 12
“Royal Bank of Canada plans to outsource to India about 280 back-office jobs, “
SIMULTANEOUSLY
Our Federal Government plans to use 50 BILLION of OUR tax dollars in an AID package to our BANKS (which several weeks ago were rated as the worlds soundest by the World Economic Forum) .
This dubious bailout is deemed necessary to grease the wheels of finance, to encourage lending by the banks, keep our economy moving, AND at its most basic , protect CANADIAN JOBS!
This outsourcing of almost 300 jobs to India, by the Royal Bank, under these current economic circumstances is jarringly UNETHICAL to say the least.
I am outraged and have just emailed my MP, the PM and Mr. Flaherty and urge other readers to do the same. These CANADIAN Banks have moral and fiscal responsibilities to CANADA as well as to their bottom lines!

hhv said...

Art,

we both know and understand that the MLS system is the monopoly equivalent of Windows: sure other ways to work exist, but this one is generally accepted as the most widely used and therefore you're missing out if you don't join in.

Anonymous said...

A third of Canadians see lower house prices: survey

November 18, 2008 at 11:36 AM EST

The number of Canadians who now expect housing prices to fall has more than doubled since last spring, a survey by a mortgage brokers group has found.

The figure now stands at 35 per cent, the Canadian Association of Accredited Mortgage Professionals (CAAMP) said Tuesday in releasing its annual fall survey on consumer perceptions. This is up from 15 per cent in the spring survey, the association said.

“Almost one-half of those surveyed gave a neutral answer while the number who thought prices would go up fell from 40 per cent to 20 per cent,” it said in a news release. “Westerners, who have endured particularly hot housing markets, are most negative, and in British Columbia, 48 per cent of those surveyed said they expect prices to fall, far above the national average.”

greg said...

take it easy art,

if Zillow can estimate prices in the US where title information is freely available off the net, it obviously is possible here as well.... if the title information was available freely off the net.

Unfortunately, it's not, therefore the de facto MLS monopoly is maintained.

If Zillow could get into the Canadian marketplace easily, you think the so-called value added nature of the MLS based on input of the appraisers, realtors etc would be withstand the much cheaper alternative?

I don't think so...

Frankly, technology has long since surpassed the present day organization of the real estate industry, the ability to do real estate transactions without an agent just hasn't been actualized yet for the masses - but it will be.

Oh, Google also has a real estate listing service in beta development, if you don't think Zillow can do it, what about Google?